Usha Martin Ltd (UML) will now seek its shareholders’ approval on November 10 with regard to the sale of its steel business to Tata Steel. The approval will be sought through special business in the extraordinary general meeting next month. The UML management on Wednesday took the decision. Meanwhile, the engineering labour union of Usha Martin has taken up the entire issue with the Jharkhand chief minister, demanding an inquiry by the enforcement directorate (ED) into the activities of Usha Martin Industries’ managing director Rajeev Jhawar. The union has also alleged that the company’s management was not paying salaries to its labourers for last 2-3 years and is making excuses that the company is in losses.
An Usha Martin spokesman also admitted that the company had gone through a difficult period in the past few years and has had unavoidable delays in payment of salaries by a few days on some occasions. “A splinter group of employees, part of an unorganised union, is fuelling unrest at our plant in Ranchi for the past 4-5 days demanding enhanced bonus etc. The steel business sale to the Tatas will result in a debt free and healthy balance sheet and the company will become robust to meet all its financial commitments in time,” the spokesman said.
Meanwhile, in a notice to the shareholders on Wednesday, the company said, “An extraordinary general meeting of the members of UML will be held on November 10, 2018 to transact the sale of the steel business undertaking of the company to Tata Steel as a going concern on a slump sale basis.”
Tata Steel had earlier said it had executed definitive agreements for the acquisition of UML’s steel business for Rs 4,300-4,700 crore through a slump sale on a going concern basis.
As per UML, the sale of its steel business to Tata Steel will help the company to significantly reduce its debt. UML’s steel business comprises the specialised 1 million tonne per annum (MTPA) alloy based manufacturing capacity in long products segment based in Jamshedpur, a producing iron-ore mine, a coal mine under development and captive power plants, Tata Steel said. It is amongst the largest wire rope manufacturers in the world and a leading speciality steel producer in India.
India Ratings and Research (Ind-Ra), in its latest report, said, “Ind-Ra believes the proposed acquisition will lead to a modest increase in TSL’s net leverage to about four times higher in FY20. The transaction price reflects a slump sale acquisition with no debt and all cash purchase price, which it plans to fund with a balanced mix of internal accruals and debt. TSL will help in improving the blended Ebitda/tonne of the acquired business to Rs 8,000/tonne by FY21 from the current Rs 6,800/tonne on the back of captive coal supplies, optimisation of sales mix and other operational synergies. The acquired division is likely to contribute a modest 3.5 per cent to TSL’s absolute Ebitda in FY20.”